Isn’t investing in emerging market currencies risky?
A. It is true these investments may increase the risks of investing in the Fund. However, Lazard’s emerging market currency and debt strategy has been based on data and active management, over the past 10 years, which shows that it is possible to earn high risk-adjusted returns by purchasing emerging market forward currency contracts and debt instruments while diversifying currency devaluation risk both within each region and across regions, defined as Latin America, Central and Eastern Europe, Africa, the Middle East, Africa, and Asia. The key is that historically, correlations between emerging market forward currency contracts and debt instruments are very low; hence the diversification benefits on a portfolio level are significant. The strategy is predicated on two assumptions: first, that correlations between currency movements are low enough to make diversification efficient; and second that the returns are high enough to compensate for the risks. Historical data have supported bo
